Enter the sponsor’s overhead rate and the direct costs into the calculator to determine the indirect costs.

## Indirect Costs Formula

The following formula is used to calculate the indirect costs of a budget preparation

IC = SOR/100 * DC
• Where IC is the indirect costs ($) • SOR is the sponsors’ overhead rate (%) • DC is the direct cost base ($)

To calculate the indirect costs, multiply the overhead rate by the direct cost.

## Indirect Costs Definition

Indirect costs are defined as project-related costs that cannot easily be identified for a particular project. In other words, these are the overhead costs of a project.

## How to calculate indirect costs?

Example Problem #1:

Next, determine the direct cost base. The direct cost base of this planned project is budgeted to be $100,000.00. Finally, calculate the indirect costs using the formula above: IC = SOR/100 * DC = 50/100 *$100,000.00
= $50,000.00. Example Problem #2: In this next example, the sponsor’s overhead rate is much higher, at 87% of direct costs. The direct costs of this project are also higher at$200,000.00.